Neiman Marcus Profits Triple

Rebound in luxury spending helps retailer in quarter.

Neiman Marcus Group, seeing affluent shoppers exhibit some renewed appetite for fall and resort fashions — and often at full price — reported strong results for its quarter ended Oct. 30.

This story first appeared in the December 9, 2010 issue of WWD.  Subscribe Today.

The retailer’s net income for the three months tripled to $25.7 million from $8.5 million a year earlier. Operating earnings reached $99.8 million compared with $74.8 million. Revenues rose 6.7 percent to $927.2 million from $868.9 million, and comparable sales grew 6.4 percent.

“We are making nice progress. I think the customer is responding to newness,” Karen Katz, Neiman’s president and chief executive officer, told WWD. “She is back shopping again,” though buying more “deliberately,” Katz added.

Neiman’s cited an increase in full-price selling, a slight decrease in promotional activity, “strong and steady” business at Bergdorf Goodman and “stringent” expense controls as reasons for the improved results.

According to Katz, spending is not back to prerecession levels, and she has no expectation that it will be anytime soon. Yet, customers are buying “across the range of prices that we offer.”

Resort merchandise, which has been in the stores for about four weeks, is selling well, particularly shoes, handbags and coral-colored merchandise, which bodes well for spring, Katz added. “It could be a good indicator.” Still, she was cautious about reading too much into the preliminary results. “I think it is always difficult to predict what the actual selling will be based on pre-collections, but these resort deliveries are extremely important. In many cases it leads to reorders.”

“It’s very telling that after such a dark fall season, the customer is definitely responding to the newness of all the color on the floor right now,” said Ken Downing, senior vice president, fashion director. He cited corals, prints, florals, stripes and such graphic patterns as abstracted dots as receiving a strong response.

In terms of items and silhouettes, Downing mentioned dresses cut closer to the body, blouses with special detailing, pants cut a bit wider than past seasons, espadrille influences on platform wedges and details and colors on handbags as bestsellers.

To sustain the newfound momentum, Neiman’s is embracing technology aggressively. Asked to specify some initiatives, Katz said, “It will be across the spectrum. Frankly, we have to do a better job within our stores communicating with our customers.” She spoke of the possibility of more apps, as well as adding mobile devices for associates and “larger”-scale technology initiatives that could involve enhanced point-of-sale and inventory systems. “We are in the middle of making determinations,” Katz said.

During a conference call, Katz said, “Our sense is that customers are tired of shopping their closets and want something new. We remained focused on top-line sales and we had slightly less promotional activity than last year…December is the time we actually start marking down fall deliveries,” as resort product flows in. “We believe we are well positioned with luxury fashion and the latest trends. With leaner inventories comes an aura of exclusivity, and it may no longer pay to wait for the markdown,” meaning if a consumer waits too long to buy a product, there’s a greater chance this year that it is sold out before they get to it.

Katz acknowledged certain parts of the ready-to-wear business have been weak. Nevertheless, “We don’t have any big liabilities in terms of excess markdowns….Things at the high end are doing very well. We went through a rebalancing in terms of price points and needed to fill in the middle and opening price points. We’ve actually had nice success there.” For example, “In our handbag division, everything had grown to the very high end. We came back and balanced out with existing vendors, and it has been working extremely well.”

Other initiatives and projects, particularly in the technology and new-media arenas, are high on Katz’s agenda. She took the Neiman’s ceo reins last October, after Burt Tansky retired.

Regarding the three Last Call Studio stores recently launched, Katz said the concept has been well received, and that after the holiday season the company will have a better sense of their viability. Last Call Studios are in towns and stocked exclusively with directly purchased product, while Last Call Clearance Centers are primarily in outlet centers outside of major metropolitan areas and are stocked with merchandise from Neiman Marcus full-line stores, catalogues and merchandise from Bergdorf’s as well as directly purchased merchandise.

Neiman’s also launched lastcall.com in October, which sells designer and trend merchandise primarily bought from vendors. Between lastcall.com and neimanmarcus.com, “There won’t be any cannibalization,” Katz said. “There’s a crossover of about 10 percent. We are fine with cross-shopping. There is marked difference in the product. We are offering great fashion and great brands on both, but they’re very different in their look and appeal.”

Regarding Cusp, Neiman’s specialty chain for contemporary apparel and accessories, the verdict on whether to roll it out will be made in the next few months, Katz said. Cusp has six freestanding stores and three shops inside Neiman Marcus stores.

“We are looking at all aspects of the shopping experience and ways to make our stores exciting and modern,” Katz said. “We can not be complacent or static. We have to evolve to stay relevant and modern. We are moving forward quickly and decisively.”